Hollywood’s Selectable Output Control: has it gone from FUD to dud?

It's been two years since the FCC authorized selectable output control. Where are the movies?

One year and eleven months ago, the Federal Communications Commission made a decision that Hollywood hailed as a huge breakthrough and reform groups called a setback for consumer rights. The FCC gave the studios and cooperating pay television companies permission to shut down the analog streams to HDTV home theaters. The technical term for this is "selectable output control"—until May of 2010 forbidden by the Commission; now available via waivers.

"This action is an important victory for consumers who will now have far greater access to see recent high definition movies in their homes," declared Bob Pisano, then President of the Motion Picture Association of America, shortly after the ruling. "And it is a major step forward in the development of new business models by the motion picture industry to respond to growing consumer demand."

MPAA lobbied for selectable output control for two years. The studios contended that they wanted to offer their movies to the pay-TV subscribing public on a pre-DVD release basis, but only if they could do so exclusively on the encryptable digital connection to HDTV home theaters, not the less secure analog connection.

"The Petitioners' theatrical movies are too valuable in this early distribution window to risk their exposure to unauthorized copying, redistribution or other unauthorized activities," MPAA's original petition noted. "Distribution over insecure outputs would facilitate the illegal copying and redistribution of this high value content, causing untold damage to the DVD and other 'downstream' markets." Millions of lower income families would be served by being able to view early release movies in their comfort of their homes, the argument went.

But groups like Public Knowledge and the Consumer Electronics Association pushed back that the move wouldn't be fair to tens of thousands of consumers who had bought analog only HDTVs and similar devices. CEA went so far as to contend that the change would "disable" crucial features for the video gear that millions of consumers had bought in stores. Ars itself and the National Cable and Telecommunications Association went head to head on the issue, debating the question on the op-ed pages of this site.

Yet almost two years later, there are few signs that Hollywood and the cable companies have followed up on their hard-won opportunity. To be fair, it's very difficult to know what is in the production mix, unless you are an insider. Still, our inquiries to the top studios and cable companies elicited no evidence of significant selectable output control offerings.

Nothing to report, but thanks

"We don't know offhand of any providers that are utilizing the SOC waiver for early-release movies," the NCTA's Brian Dietz told us, "so you probably will have to check with MPAA and some of the companies themselves, both cable and DIRECTV." And so we did, first talking to MPAA Vice President Howard Gantman. Gantman cited early VOD releases like Margin Call, which he acknowledged wasn't streamed on an SOC basis. Comparing notes, it was clear that he hadn't seen much development in this area, either.

"It's now up to our studios and other film distributors," Gantman noted. His and the NCTA's comments were the most forthcoming responses that we received. No studio responded to our query; a few cable companies did. "Nothing to report on this. Thanks for checking in," a representative for Comcast told us. "Let me look into this and see what I can find out," a Time Warner Cable person replied. That was the last we heard from him.

You would think that the CEA would know if something was coming down the pipe. "I'm afraid we don't have much to add at this time," a spokeperson confided.

So the big question is why, after all that sturm und drang, are the fruits of this battle so difficult to discern? We've got two tentative answers. The first is that significant opposition to digital-only early-release video on demand hasn't subsided just because the MPAA won its SOC waiver.

The second reason is broader and perhaps more important. One of the challenges that the FCC faces is that by the time it vets a proposal to regulate or deregulate some aspect of the telecommunications industry, the relevant markets and technologies have sometimes so evolved that the decision can lose its significance. This appears to be one of those cases.

Collapsed distribution

During the great debate over SOC, the movie theater operators also weighed in. The National Association of Theater Owners (NATO) represents that group—over 600 movie theater companies that collectively run about 30,000 movie screens across the United States.

The trade association's June 2008 filing tried to be diplomatic about the MPAA's proposal, but what stood out in the comment was fear. "The American cinema industry certainly does not appear to have been in the Commission's contemplation when crafting either the underlying rule or the standards and procedures for obtaining a waiver," NATO wrote, adding that the proposal contains the "alarming threat of collapsed distribution windows."

It's not hard to discern the problem from NATO's standpoint—fewer consumers paying money to attend big box theaters, and more staying home. The business model described in the MPAA's petition "could have a devastating effect on the member companies we represent as well as consumers of motion pictures," NATO's filing warned. "While NATO and its member companies generally support their studio partners on measures designed to protect intellectual property, it is not yet clear to us whether the underlying business model driving this IP-protection effort is in the public interest."

NATO may have lost this game in the FCC's court, but one Hollywood insider told us on background that the industry is still "adamantly" exerting pressure on the studios. There are a lot of "business involvements still being worked out," this person explained. Agreed, someone associated with the theaters told us. "Any attempt to close the window from the time between when the movie comes out and it goes to DVD will be opposed by the theatrical industry," he noted.

120 days later

The biggest part of this episode's irony is probably found in that DVD observation. When the MPAA first petitioned the FCC for selectable output control in May of 2008, DVDs were still a huge force in movieland. They generally came out about 120 days after a theatrical release. But a year earlier, we started noticing that DVD sales were starting to peak.

And by 2010 it was obvious that the DVD business was in real trouble as Netflix put more and more of its resources into online streaming. The SNL Kagan media tracking company, after following the fate of 415 titles, reported that wholesale DVD sales had dropped by over 40 percent from 2010—$7.97 billion in 2009 to $4.47 billion the next year. A year later, the Sandvine research company pronounced Netflix "the unquestioned king of North America's fixed access networks." Sandvine's measurements of total traffic averaged over the full day indicated that the online video provider even outpaced BitTorrent as the top data provider on North American wired systems. Netflix scored a 22.2 percent share, as opposed to BitTorrent's 21.6.

Bottom line: as the antagonists debated the selectable output control question, the Apple TV, Netflix, Hulu, Boxee revolution raced along, making the SOC debate less relevant, and early release windows more difficult to define. The FCC's Order on SOC requires any company that takes advantage of the option to file a report "two years from the first use of SOC pursuant to this waiver." It may be that no studios will file a report over the coming months.

"We do believe that SOC was significant and important," the MPAA's Howard Gantman told Ars. No question about it. The FCC clearly agreed that secure outputs trumped the options for analog only HDTV owners. But as old home pay-TV gear gets shelved and new equipment comes in, the analog numbers are doubtless dwindling. The Selectable Output Control debate is now an obscure chapter in the history of the 'Net. What remains is a troubling question—will our ability to oversee this remarkable media landscape ever keep pace with our zeal to create it anew?

Postscript: 4/2/12

After we went to press on this story, DIRECTV responded to our inquiry. "Sorry, this got buried in an avalanche of email last week," a press contact explained. "Our first run movies we offer are done this way [selectable output control]."

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.